1513-0025 Law and Regs.

-6-

1513-0025

26 U.S.C.

§ 5704. Exemption from tax

(a) Tobacco products furnished for employee use or experimental purposes

Tobacco products may be furnished by a manufacturer of such

products, without payment of tax, for use or consumption by employees or for experimental purposes, in such quantities, and in such manner as the Secretary shall by regulation prescribed.

(b) Tobacco products and cigarette papers and tubes transferred or

removed in bond from domestic factories and export warehouses

A manufacturer or export warehouse proprietor may transfer tobacco

products and cigarette papers and tubes, without payment of tax, to the

bonded premises of another manufacturer or export warehouse proprietor,

or remove such articles, without payment of tax, for shipment to a

foreign country, Puerto Rico, the Virgin Islands, or a possession of the United States, or for consumption beyond the jurisdiction of the

internal revenue laws of the United States; and manufacturers may

similarly remove such articles for use of the United States; in

accordance with such regulations and under such bonds as the Secretary

shall prescribe. Tobacco products and cigarette papers and tubes may not be transferred or removed under this subsection unless such products or papers and tubes bear such marks, labels, or notices as the Secretary shall by regulations prescribe.

(c) Tobacco products and cigarette papers and tubes released in bond

from customs custody

Tobacco products and cigarette papers and tubes, imported or brought into the United States, may be released from customs custody, without payment of tax, for delivery to the proprietor of an export warehouse, or to a manufacturer of tobacco products or cigarette papers and tubes if such articles are not put up in packages, in accordance with such regulations and under such bond as the Secretary shall prescribe.

(d) Tobacco products and cigarette papers and tubes exported and

returned

Tobacco products and cigarette papers and tubes classifiable under

item 804.00 of title I of the Tariff Act of 1930 (relating to duty on

certain articles previously exported and returned) may be released from

customs custody, without payment of that part of the duty attributable

to the internal revenue tax for delivery to the original manufacturer of such tobacco products or cigarette papers and tubes or to the proprietor of an export warehouse authorized by such manufacturer to receive such articles, in accordance with such regulations and under such bond as the Secretary shall prescribe. Upon such release such products, papers, and tubes shall be subject to this chapter as if they had not been exported or otherwise removed from internal-revenue bond.

(Aug. 16, 1954, ch. 736, 68A Stat. 708; Pub. L. 85-859, title II,

Sec. 202, Sept. 2, 1958, 72 Stat. 1418; Pub. L. 88-342, Sec. 1(b), June

30, 1964, 78 Stat. 234; Pub. L. 89-44, title V, Sec. 502(b)(4), June 21, 1965, 79 Stat. 151; Pub. L. 94-455, title XIX, Secs. 1905(a)(26),

1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1821, 1834; Pub. L. 99-509, title VIII, Sec. 8011(a)(2), Oct. 21, 1986, 100 Stat. 1952; Pub. L. 101-239, title VII, Sec. 7508(a), Dec. 19, 1989, 103 Stat. 2370; Pub. L. 105-33, title IX, Sec. 9302(h)(1)(A), Aug. 5, 1997, 111 Stat. 673; Pub. L. 106-476, title IV, Sec. 4002(b), Nov. 9, 2000, 114 Stat. 2177.)

27 CFR

Sec. 41.85 Release from customs custody of imported tobacco articles.

(a) The provisions of this section apply only to tobacco products,

cigarette papers, and cigarettes tubes, which are not put up in

packages, i.e., not placed by the manufacturer or importer in packages

in which the products will be sold to consumers. Tobacco products

manufactured in a foreign country, the Virgin Islands, or a possession

of the United States may be released by the Port Director of Customs or

authorized customs officer from customs custody, without payment of

internal revenue tax, for transfer to the factory of any manufacturer of tobacco products under the internal revenue bond of the manufacturer to whom such articles are released. Cigarette papers and tubes manufactured in a foreign country, the Virgin Islands, or a possession of the United States may be released by the Port Director of Customs or authorized customs officer from customs custody, without payment of internal revenue tax, for transfer, under the internal revenue bond of the manufacturer to whom such articles are released, to the factory of a manufacturer of cigarette papers and tubes; or a manufacturer of tobacco products solely for use in the manufacture of cigarettes. Releases under this section must be in accordance with Sec. 41.86: Provided, however, that in the case of products exported from the Virgin Islands, in order for a manufacturer of tobacco products or a manufacturer of cigarette papers and tubes to remove such products from customs custody in the United States under the manufacturer's internal revenue bond without payment of internal revenue tax, the manufacturer must file an extension of coverage of the internal revenue bond on TTB Form 2105, and receive a notice of approval from the appropriate TTB officer. The extension of coverage must be executed by the principal and the surety and must be in the following form:

``Whereas the purpose of this extension is to bind the obligors for

the purpose of the tax imposed by 26 U.S.C. 7652(b), on tobacco products and tubes exported from the Virgin Islands and removed from customs custody in the United States without payment of internal revenue tax, for delivery to the principal on said bond.''

``Now, therefore, the said bond is further specifically conditioned

that the principal named therein must pay all taxes imposed by 26 U.S.C. 7652(b) plus penalties, if any, and interest, for which he may become liable with respect to these products exported from the Virgin Islands and removed from customs custody in the United States without payment of internal revenue tax thereon, and must comply with all provision of law and regulations with respect thereto.''

(b) Articles received into the factory of a manufacturer under the

provision of this section are subject to the provisions of part 40 of

this chapter.

(72 Stat. 1418, as amended; 26 U.S.C. 5704)

[T.D. ATF-422, 64 FR 71949, Dec. 22, 1999. Redesignated and amended by

T.D. TTB-16, 69 FR 52424, 52425, Aug. 26, 2004]

Sec. 41.85a Release from customs custody of returned articles.

(a) Domestically produced tobacco products (classifiable under item

9801.00.80 of the Harmonized Tariff Schedule of the United States, 19

U.S.C. 1202) exported from and returned to the United States without

change to the product or the shipping container may be released, under

the bond of the manufacturer or export warehouse proprietor to whom such articles are released, from customs custody in the United States without payment of that part of the duty attributable to the internal revenue tax for delivery to the factory of any tobacco products manufacturer or to the permit premises of an export warehouse proprietor.

(b) Domestically produced cigarette papers and tubes (classifiable

under item 9801.00.80 of the Harmonized Tariff Schedule of the United

States, 19 U.S.C. 1202) exported from and returned to the United States

without change to the product or the shipping container may be released

from customs custody in the United States without payment of that part

of the duty attributable to the internal revenue tax for delivery, under the bond of the manufacturer to whom such articles are released, to the factory of:

(1) A manufacturer of cigarette papers and tubes; or

(2) A manufacturer of tobacco products solely for use in the

manufacture of cigarettes.

(c) Releases under this section must be in accordance with the

procedures set forth in Sec. 41.86. Once released, the tobacco products

and cigarette papers and tubes will be subject to the tax and all other

provisions of 26 U.S.C. chapter 52, and, as applicable, subject to the

provisions of the regulations in part 40 of this chapter as if they had

not been exported or otherwise removed from internal revenue bond.

(72 Stat. 1418, as amended; 26 U.S.C. 5704)

[T.D. ATF-422, 64 FR 71949, Dec. 22, 1999. Redesignated and amended by

T.D. TTB-16, 69 FR 52424, 52425, Aug. 26, 2004]

Sec. 41.86 Procedure for release.

(a) Every manufacturer of tobacco products and cigarette papers and

tubes and every export warehouse proprietor who desires to obtain the

release of tobacco products and cigarette papers and tubes from customs

custody, without payment of internal revenue tax, under its internal

revenue bond, as provided in Sec. Sec. 41.85 or 41.85a, must prepare a

notice of release, Form 5200.11, in triplicate, and file the three

copies of the form with the appropriate TTB officer. The appropriate TTB officer will not certify Form 5200.11 covering the release of tobacco products and cigarette papers and tubes unless the manufacturer is authorized, under part 40 of this chapter, to receive, without payment of tax, the kinds of articles set forth in the form.

(b) Importers who are either manufacturers of tobacco products and

cigarette papers and tubes or export warehouse proprietors, or their

authorized agents, who request the release of tobacco products or

cigarette papers and tubes from customs custody in the United States

under this section, using customs electronic filing procedures, must not request such release until they have received the TTB Form 5200.11

certified by the appropriate TTB officer. Once Customs releases the

tobacco products or cigarette papers and tubes in accordance with 19 CFR Part 143, Customs Directives, and any other applicable instructions, the importer will send a copy of the TTB Form 5200.11 along with a copy of the electronic filing and customs release to the appropriate TTB officer at the address shown thereon. The importer will retain one copy of the TTB Form 5200.11 to meet TTB recordkeeping requirements and one copy to meet customs recordkeeping requirements.

(c) Importers or their authorized agents requesting release of

tobacco products or cigarette papers and tubes from customs custody in

the United States under any other authorized procedure will submit all copies of the TTB Form 5200.11 to the appropriate customs officer along with their request for release. The customs officer will verify that the TTB Form 5200.11 has been certified by the appropriate TTB officer and return all copies to the importer or the importer's authorized representative.

(d) Once Customs releases the tobacco products or cigarette papers

and tubes in accordance with 19 CFR Part 143, Customs Directives, and

any other applicable instructions, the importer will send a copy of the

TTB Form 5200.11 along with a copy of the customs release to the

appropriate TTB office at the address shown thereon. The importer will

retain one copy of the TTB Form 5200.11 to meet TTB recordkeeping

requirements and one copy to meet customs recordkeeping requirements.

(72 Stat. 1418, as amended, 1423, as amended; 26 U.S.C. 5704, 5741)

[T.D. ATF-422, 64 FR 71950, Dec. 22, 1999. Redesignated and amended by

T.D. TTB-16, 69 FR 52424, 52425, Aug. 26, 2004]

Sec. 45.33 Return of shipment to factory.

Tobacco products, and cigarette papers and tubes which have been

removed, under this part, may be returned to the factory without

internal revenue supervision.

(72 Stat. 1418, as amended; 26 U.S.C. 5704)

[T.D. 6871, 31 FR 57, as amended by T.D. ATF-243, 51 FR 28090, Aug. 5,

1986; 51 FR 43194, Dec. 1, 1986]

Sec. 45.51 Supporting records.

(a) Records of removals. Every manufacturer who removes tobacco

products, and cigarette papers and tubes under this part must, in

addition to the records kept under part 40 of this chapter, keep a

supporting record of such removals and must make appropriate entries

therein at the time of removal. The supporting record for each removal

must show:

(1) The date of removal;

(2) The name and address of the Federal agency to which shipped or

delivered;

(3) The kind and quantity and,

(4) for large cigars, the sale price.

(b) Records of returns. If any tobacco products, or cigarette papers or tubes removed under this part are returned to the factory, such returns must be noted in the supporting record.

(c) Commercial records. Where the manufacturer keeps, at the

factory, copies of invoices or other commercial records containing the

information required as to each removal, in such manner that the

information may be readily ascertained therefrom, such copies will be

considered the supporting record required by this section.

(d) Retention period. The manufacturer must retain the supporting

record for 3 years following the close of the year covered therein. The

record must be made available for inspection by any appropriate TTB

officer upon request.

(Approved by the Office of Management and Budget under control number

1513-0069)

(See 26 U.S.C. 5741)

[T.D. ATF-420, 64 FR 71945, Dec. 22, 1999, as amended by T.D. ATF-472,

Feb. 27, 2002]